Why "good standing" is important for your BC company or society

With the real estate market being so hot these days in many parts of British Columbia, it's become more important than ever to understand why it's important to keep your British Columbia company in good standing. If you used your company to buy land, you can lose that land to the government if you don't keep up with your company's annual filings. The same considerations apply to societies that are incorporated in British Columbia -- all those charitable groups, religious and community organizations, and so on.

What does "good standing" mean?

Every British Columbia company is required to file a document called an "annual report" with the Corporate Registry every year. The document must be filed online. At present, the government charges a filing fee of $45 for the annual report. Some people do it themselves, and others do it through their registered office service. INC Business Lawyers provides registered office services to keep these filings and their supporting documents, the annual shareholder and director resolutions, up to date. (A similar requirement exists for societies, though there are differences in the details.)

As with most kinds of government filings, there are deadlines attached. Annual reports must be filed within 60 days of the company's date of incorporation in British Columbia. It is possible to file reports later than that, almost always without penalty. Technically speaking, not filing the annual report on time is an offence and could be penalized, but there are huge numbers of companies that don't file the report on time, and the sky doesn't fall.

Because there's no penalty for late filings, many people delay filing their annual reports, just to defer an unwelcome expense for a year or so. The trouble arises when your BC company falls two years behind in its filings. When that happens, the Corporate Registry eventually starts a process that will result in the company ceasing to exist if the annual report filings are not brought back up to date. Fortunately, the Corporate Registry allows several months of grace after the two year anniversary before they'll start this dissolution process, so many people can save their companies at that point.

But some companies aren't saved. Sometimes that's intentional, but other times it's inadvertant. Perhaps the company moved from its registered office location and didn't bother updating that information with the Corporate Registry (through filing a notice of change of offices, which costs about $22 to file). Or the annual report reminder document got buried on someone's desk.

A company or society that gets struck from the BC register of companies is dead. It no longer exists, though it can be restored. Many people learn their company was struck when they go to file their corporate income tax returns and those returns get bounced by Canada Revenue Agency because the company has been struck.

Losing Land by Escheat

BC companies or societies that have been dissolved can be restored for a period of 10 years after the date of dissolution. But, for the purpose of this article, the important thing to note is that at the date of dissolution all of the assets of the company, whether personal property or real property (land), pass to the British Columbia government. The technical word for this passing is "escheat" (and you may think it's cheating for the law to be written that way, but it is something every company owner should be aware of).

We'll focus on land in this article. If you can get your company restored within two years from the date of dissolution, then there's no problem. Section 4 of the Escheats Act provides automatically that land owned by the company at dissolution will be automatically restored to any company that's revived within two years from dissolution. The Escheats Act also says that the government can't deal with the property for that first two years.

However, where more than two years have passed, then the procedure to restore your company (or society) will be more involved. At this point, the Escheats Act gives you two choices:

1. If you're still within the 10 year window for restoration, most BC companies will be able, and want, to follow this first option. In general, the procedure here is to serve the government with legal notice of the court application to revive the company and then go to court to have the application dealt with. The Escheats Act empowers the court to make an order that restores the land to the company or society. The Act does, however, require the court to include in that order any costs that the government was put to by reason of the escheat of land. To restore a society, you'll be going to court anyway, so this extra part of the order doesn't mean a great deal of extra work. For BC companies, though, there would be some extra work, because under the new Business Corporations Act most restorations can be done without a court order.


2. The second procedure available under the Escheats Act to obtain escheated land back from the government is to apply directly to the Cabinet of the provincial government. In order to do this, you'll need to follow the procedure and provide the information that the Escheats Office requires. They're located in Victoria, and will readily provide a memo setting out what is needed. In general terms, your corporation will need to be able to provide clear evidence that it actually owned the land, supported by affidavits from directors of the company. This procedure typically takes longer than the first procedure. It can be used within the 10 year window for revival of a BC corporation, instead of the first procedure, but it's main benefit is that it can also be used after the 10 year window has closed, when it will be impossible to revive the corporation.

INC Business Lawyers has processed many restoration applications. And, sad to say, we're getting experience now in the Escheats Act when it comes to recovering land for a dissolved BC corporation or BC society. If your company or society has fallen into this kind of trouble, please drop us an e-mail or give us a phone call, and we'd be pleased to help you out.

Incorporation basics (2) - Choose a name - legal considerations

Last week, we looked at marketing considerations in choosing a name for your new corporation. We also discussed ideas for choosing a name for your company. This week, we'll look at the legal considerations in choosing a corporate name for your British Columbia corporation.

(Before going further, a word of caution: we can't cover all, or even most, of the various legal considerations that might arise in choosing a corporate name. We'll try to hit the highlights. For any questions that arise, you should obtain legal advice for your particular situation. These blogs are not to be construed as specific legal advice.)

What's allowable and not in a corporate name will depend, ultimately, on the jurisdiction in which you incorporate. Most jurisdictions have developed name policies that guide whether your proposed name will be acceptable. Some of these are available online, and other's aren't. For example, the federal government name policies are easily found at www.strategis.gc.ca. For starters, you can read the brochure. For more detailed information, read the compendium and guidelines. In British Columbia, the corporate name guidelines are similar, but don't seem to be accessible online.

The first task in choosing a corporate name is not to take someone else's corporate name or trade-mark. To do so would expose you to a claim for trade-mark infringement or "passing off". This is a whole topic in itself, but in general, remember these points:

• Don't fixate the first name that pops into your head. If you thought of it now, someone else might already have it.


• Do some searching. How much to search is up to you. Free searches include looking up names in telephone books, both in print and online, doing domain name searches, and using various internet search engines. The Strategis website mentioned above gives free access to the Canadian trade-marks database, where you can do simple searches to make sure you're not unknowingly taking someone else's mark. You can also do more formal paid-for searches. We can supply those searches to you. They cover all business names and even trade-marks registered in Canada, or broader. The cost for this kind of search starts at about $25, if the search is ordered along with our standard incorporation package. Searches can be as broad as you like, but the broader they are, the costlier. At the upper end, a full search of US and Canadian names and trade-marks can run several hundred dollars. Most people won't need that level of searching, but if you're starting a business that will work down into the United States, it may be worthwhile.

Second, here in BC, your corporate name must use a three-element format; for example, "Smith's Dogwalking Inc." A two-element format (such as Microsoft Corporation) isn't allowed until you have trade-marked the distinctive first element in your name.

The three required elements are:

1. Distinctive element: This is typically the first element in the name and serves to make your name distinct from those of others. In the example, "Smith's" is the distinctive element.


2. Descriptive element: This middle element is meant to give the people who deal with your corporation some idea of what the corporation does. The idea can be as general (such as "products", "holdings", "enterprises") or as narrow (such as "blue-eyed dogwalking") as you wish. And note that you're not restricted to the business suggested by the descriptive element. If "Dogwalking" is your descriptive element, you can operate all kinds of businesses, whether related to dogs or not. (You might confuse your customers, but that's a different issue.)


3. Incorporation Suffix: All corporate names must end with a word or abbreviation to show that they are limited liability entities. In BC, the allowable choices are "Incorporated" or "Inc.", "Limited" or "Ltd.", and "Corporation" or "Corp." The suffixes all mean the same thing, so choose the one you want based on marketing considerations. For example, if you're dealing into the United States, choose "Inc." or "Corp." (or those words spelled out in full), as those are the usual incorporation suffixes used in the United States. By contrast, those dealing into Hong Kong or into Great Britain may want to use "Ltd."

Given the wide variety of possible names, it's not possible to list all of the do's and don'ts of creating a name that will be acceptable in the Corporate Registry here in BC. If you stick to my Smith's Dogwalking Ltd. example as a model, you won't go far wrong.

If you'll be selling outside of British Columbia, you can incorporate your corporate name in English and add as many foreign language translations of the name as you like.

Here are some more examples of what not to do in creating your corporate name:

• Your name can't connote a connection with royalty or any government. So "Smith's Royally Approved Dogwalking Services Ltd." won't fly.


• Similarly, you can't use the name of another Canadian province in your company's name, unless you're incorporating in that province. "Smith's Dogwalking Nova Scotia Ltd." is out, if you're incorporating in BC.


• Not all descriptive elements are allowed. This applies mostly in industries where special legislation or regulatory permission is needed in order to carry on business, such as most professions (engineering, law, medicine, dentistry, accounting, veterinarian) and certain regulated industries such as banking, insurance and railways.


• It should go without saying, but do note that names with a pornographic or racist or other -ist bent won't be accepted. This is usually not a problem.


• A lot of people, probably having seen names that are allowed in other jurisdictions, like to suggest using a word such as "Group" or "National" or "International" as the sole descriptive (middle) element; for example, "Smith's Group Ltd." Sorry, it's just not allowed here in BC, so please don't offer it as a suggestion to begin with. Using those words with another word in the middle element is fine: "Smith's Dogwalking Group Ltd."


• If you'd like to use "Canada" or "British Columbia" in the name, that's ok, but there's a funny rule regarding the use of round brackets ( ) to surround those words: you can only use the round brackets if you've already got a corporation with a similar name and the new corporation will be part of that group; otherwise, you can't use the round brackets. So, if I've already incorporated Smith's Dogwalking Ltd. in Alberta, then I can get "Smith's Dogwalking (BC) Ltd." through. But if my BC corporation is the only corporation I've got, then I'd have to settle for "Smith's Dogwalking BC Ltd.". (I don't make the rules; I'm just telling you what they are.)


• If you want a name that begins with initials, be aware that, at this point, almost all two initial names (eg, "AB Dogwalking Ltd.") are taken, at least for more common descriptive elements (like "products", "enterprises", "services", and so on). If you're bound and determined to use only two initials to start the name, we'll look it up for you, but make sure you give us an unusual descriptive element. And you may be far better advised to spend your time using a third and even fourth initial. This problem will only get worse as time goes on.


• Similarly, some distinctive elements are extraordinarily common, depending where you live in the province, so you'd be better off making a different choice right from the start. Examples include "Creative", "Pacific" (where you live in or near Vancouver), "Coast Mountain", and similar ideas.


• Be aware that certain descriptive (middle) element words are treated as being interchangeable by the BC Corporate Registry. For example, if "Smith's Capital Inc." exists, you won't be able to incorporate "Smith's Finance Ltd." Similar ideas play out in the construction field and other fields, too. Again, with our standard incorporation package, we do a pre-screen of names to alert you to this sort of conflict.


• The BC Corporate Registry name approval process allows you to submit up to three choices at once. We recommend that you provide us with all three choices. You'll be approved for the first available name; they don't examine all names. In providing the three choices, be aware that merely changing the incorporation suffix doesn't create a sufficiently different choice. Similarly, minor changes of spelling won't help, either: "Smith's Dogwalking Ltd." isn't any different than "Smythe's Dogwalking Corp." The names are tested both on look and sound; a similarity with an existing name on either ground will usually mean rejection of the proposed name. Similarly, merely adding a "dot com" (".com"; or some such variation) won't make a difference between two choices. The point here is that we encourage making your three choices truly different from each other. If you like your distinctive element, then choose a really different descriptive element, and vice versa.

Company names are important, as they can be a major part of setting the tone and public identity of your business. And they're one of the first decisions you'll need to make in setting up your new business. We're ready to help you through this aspect of the incorporation process, so please call or e-mail us when you're ready to incorporate.